Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Assess an Underwriting Fee on Dealers That Are Underwriters of Primary Offerings of Plans, 36472-36476 [2017-16399]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 82, Number 149 (Friday, August 4, 2017)]
[Notices]
[Pages 36472-36476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16399]



[[Page 36472]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81264; File No. SR-MSRB-2017-05]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Assess an Underwriting Fee on Dealers That Are Underwriters 
of Primary Offerings of Plans

July 31, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on July 19, 2017 the Municipal Securities 
Rulemaking Board (``MSRB'' or ``Board'') filed with the Securities and 
Exchange Commission (``Commission'' or ``SEC'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the MSRB. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed amendment to MSRB 
Rule A-13, on underwriting and transaction assessments for brokers, 
dealers and municipal securities dealers (collectively ``dealers''), to 
assess an underwriting fee on dealers that are underwriters of primary 
offerings of plans, as the terms ``underwriter'' and ``plan'' are 
defined under MSRB Rule G-45, on reporting of information on municipal 
fund securities (the ``proposed rule change'').\3\ The MSRB has 
designated the proposed rule change for immediate effectiveness. 
Beginning in May 2018, the Board will invoice underwriters for the 
assessments due under the proposed rule change. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \3\ Under Rule G-45(d)(xiv), an ``underwriter'' shall mean a 
dealer that is an underwriter, as defined in Rule 15c2-12(f)(8) 
under the Act, of municipal fund securities that are not local 
government investment pools.
    Under Rule G-45(d)(ix), a ``plan'' is a college savings plan or 
program established by a state, or agency or instrumentality of a 
state, to operate as a qualified tuition program in accordance with 
Section 529 of the Internal Revenue Code of 1986, as amended. The 
proposed rule change will not apply to underwriters of other types 
of municipal fund securities.
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    The text of the proposed rule change is available on the MSRB's Web 
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2017-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to assess an 
underwriting fee on underwriters to plans to defray the costs and 
expenses of operating and administering the MSRB. The proposed rule 
change will amend Rule A-13 to add a new fee on an underwriter to a 
plan at a rate of .0005% ($.005 per $1,000) of the total aggregate 
assets for the plan underwritten as of December 31 each year, as 
reported on MSRB Form G-45, reporting of information on municipal fund 
securities. The MSRB believes that the proposed fee is reasonable as 
well as necessary and appropriate to help defray the costs of operating 
and administering the MSRB. The MSRB is committed to appropriately and 
equitably assessing fees across all regulated activities to ensure 
fairness, and, as summarized below, the MSRB's activity concerning 
underwriters to plans has historically been funded with minimal fees.

Background

A. MSRB's Regulatory Authority Over Dealers and Underwriters to Plans

    The MSRB's regulation of dealers that sell interests in and dealers 
that are underwriters to plans began over 18 years ago. In 1998, after 
certain states created 529 college savings plans,\4\ the MSRB contacted 
the SEC to determine whether plan investments were securities and, 
further, whether they were municipal securities under the federal 
securities laws.\5\ In early 1999, in response to the MSRB's inquiry, 
SEC staff informed the Board that ``at least some interests in . . . 
higher education trusts may be, depending on the facts and 
circumstances, `municipal securities' for purposes of the Exchange 
Act.'' \6\ Based on that guidance, the MSRB began its regulation of 
dealer and underwriter activity in plans and local government 
investment pools,\7\ collectively known as municipal fund securities 
under Rule D-12, ``municipal fund security.'' Further, the Board 
expanded its mission to include, among other things, the protection of 
investors in plans and the public interest by promoting a fair and 
efficient market for interests in those plans.
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    \4\ A 529 college savings plan is a plan, as defined under Rule 
G-45(d)(ix).
    \5\ Section 529(b)(1) of the Internal Revenue Code of 1986, as 
amended (the ``Code'') provides, in part, that a 529 college savings 
plan is a ``program established and maintained by a State or agency 
or instrumentality thereof.'' 26 U.S.C. 529(b)(1).
    Although Congress amended the Code to add Section 529 in 1996, 
the market for 529 college savings plans did not grow significantly 
until after the enactment of the Economic Growth and Tax Relief 
Reconciliation Act of 2001 (``EGTRRA''). EGTRRA made several 
improvements, such as permitting distributions to be withdrawn free 
of federal income tax, if the distributions were used for qualified 
higher education expenses.
    \6\ Letter dated February 26, 1999 from Catherine McGuire, Chief 
Counsel, Division of Market Regulation, SEC, to Diane G. Klinke, 
General Counsel of the Board, in response to letter dated June 2, 
1998 from Diane G. Klinke to Catherine McGuire.
    \7\ Local government investment pools (``LGIPs'') are 
established by state or local governmental entities as trusts that 
serve as vehicles for the pooled investment of public moneys of 
participating governmental entities. Although most LGIPs are fully 
administered by governmental personnel or non-dealer contractors, a 
limited number of LGIPs involve dealers undertaking transaction-
based activities. Such dealers are subject to the MSRB's rules 
regarding municipal fund securities.
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    To support the MSRB's regulation of dealers that are underwriters 
to plans, as well as its mission to protect investors in those plans, 
the MSRB has engaged in significant rulemaking, market transparency, 
educational and market outreach initiatives. In addition, the MSRB has 
provided examination and enforcement support to other regulatory 
agencies related to dealer activity regarding plans. Those initiatives 
and support require the Board's resources, including the resources of 
its staff and of its Electronic Municipal Market Access (EMMA[supreg]) 
\8\ system.
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    \8\ EMMA is a registered trademark of the MSRB, and is the 
official repository for information on virtually all municipal 
bonds, providing free access to official disclosures, trade data and 
other information about the municipal securities market.
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i. Rulemaking Initiatives
    Approximately one third of the MSRB's general rules specifically

[[Page 36473]]

address municipal fund securities. The MSRB's rulemaking relating to 
dealers that sell interests in and dealers that are underwriters to 
plans has addressed, among other areas, professional qualifications 
(e.g., the MSRB added a new permanent category of principal--Series 
51--municipal fund securities limited principal--to supervise 
activities regarding plans under Rule G-3, on professional 
qualification requirements),\9\ fair practice (e.g., the Board 
addressed under Rule G-20, on gifts, gratuities, non-cash compensation 
and expenses of issuance, promotional gifts and ``other business 
logos'' of a 529 college savings plan for which a dealer is acting as a 
distributor,\10\ and advertising, including a proposed rule change 
relating to municipal fund security product advertisements submitted to 
the Commission on June 22, 2017, under Rule G-21(e), on municipal fund 
security product advertisements),\11\ and market transparency (e.g., 
the Board addressed disclosures in connection with the offering of 
interests in 529 college savings plans under Rule G-32, on disclosures 
in connection with primary offerings).\12\ Since 2001, the Board has 
issued over 60 regulatory notices pertaining to plans. Many of those 
notices provided guidance to dealers regarding the application of 
existing MSRB rules to plans.
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    \9\ See Exchange Act Release No. 45652 (Mar. 26, 2002), 67 FR 
15844 (Apr. 3, 2002), SR-MSRB-2002-03.
    \10\ See Exchange Act Release No. 76381 (Nov. 6, 2015), 80 FR 
70271 (Nov. 13, 2015), SR-MSRB-2015-09.
    \11\ See Exchange Act Release No. 81060 (Jun. 30, 2017), 82 FR 
31644 (Jul. 7, 2017), SR-MSRB-2017-04.
    \12\ See Exchange Act Release No. 43858 (Jan. 18, 2001), 66 FR 
8126 (Jan. 29, 2001), SR-MSRB-00-06.
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ii. Market Transparency Initiatives
    The MSRB has engaged in several market transparency initiatives 
relating to municipal fund securities. For example, under MSRB Rule G-
32, on disclosures relating to primary offerings, an underwriter to a 
plan, among other things, must submit the official offering statement 
and any amendment thereto, i.e., the program disclosure booklet for the 
plan it distributes, to the MSRB. To assist the underwriter in making 
its submission, the MSRB developed a filing portal on EMMA as well as 
the database for the underwriter's submissions. In addition, to assist 
an investor with finding the program disclosure booklet for a plan of 
interest, the MSRB developed an interactive Web site with a 50-state 
map that allows the investor to more quickly and easily access that 
information.
    Under Rule G-45, an underwriter must submit information about each 
plan for which it is an underwriter on a semi-annual basis to the MSRB. 
To facilitate such submissions, the MSRB developed two methods through 
which an underwriter could make those submissions to the MSRB so that 
the underwriter could select the method it prefers (either through the 
EMMA dataport or through a computer-to-computer interface) as well as 
developed the database for the submissions. The MSRB continues to 
enhance the database as well as to assist underwriters to plans by 
answering inquiries relating to the submission of that data through the 
MSRB's call center. Further, MSRB staff utilizes the data submitted 
under Rule G-45 to analyze plans, monitor their growth rate, size and 
investment options, and compare plans based on fees, costs, and 
performance.
iii. Educational and Market Outreach
    The MSRB has engaged in educational and market outreach both to 
underwriters to plans and to investors in those plans. That outreach 
has included: Conducting regional compliance seminars for dealers; MSRB 
staff presentations and attendance at major industry conferences; and 
the development and distribution of multiple educational pieces to 
assist dealers and investors in 529 college savings plans, including an 
investor's guide to 529 college savings plans.
iv. Market Leadership Activities
    Beyond its rulemaking, market transparency, educational and market 
outreach initiatives, the MSRB has engaged in market leadership 
activities relating to plans. Those market leadership activities, among 
other things, have resulted in Congressional testimony and in the 
development of voluntary industry disclosure standards for 529 college 
savings plan program disclosure booklets.\13\ For example, MSRB staff 
testified at a 2004 Senate subcommittee oversight hearing on sales and 
disclosure practices in the 529 college savings plan market. In 
addition, the MSRB encouraged the College Savings Plans Network to 
promulgate more comprehensive voluntary disclosure standards and to 
establish a central information clearinghouse on 529 college savings 
plans. Further, in 2009, the MSRB submitted a comment letter on the use 
of 529 college savings plans in advance of the Report on 529 College 
Savings Plans prepared by the U.S. Department of the Treasury on behalf 
of the White House Task Force on the Middle Class.
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    \13\ The MSRB's Web site discusses the Board's market leadership 
activities. https://www.msrb.org/Market-Topics.aspx.
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v. Support to Other Regulatory Agencies
    To facilitate efficient and effective examination and enforcement 
of MSRB rules, the MSRB provides support to the regulatory agencies 
that enforce the MSRB's rules. Those regulatory agencies include the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') and the 
Commission. That support includes education and guidance about MSRB 
rules, training of the staff of those regulatory agencies regarding the 
MSRB rules, and the provision of additional information about plans to 
support the monitoring of the market for potential misconduct. The MSRB 
continues and will continue in the future to provide this support.

B. Holistic Review of MSRB Fees

    The MSRB assesses dealers and municipal advisors (collectively, 
``regulated entities'') various fees designed to defray the costs of 
its operations and administration, including rulemaking, market 
transparency, educational and market outreach initiatives that fulfill 
its Congressional mandate to, among other things, protect investors, 
state and local governments and other municipal entities by promoting 
the fairness and efficiency of the municipal securities market. Section 
15B(b)(2)(J) of the Act \14\ provides, in pertinent part, that each 
regulated entity shall pay to the Board such reasonable fees and 
charges as may be necessary or appropriate to defray the costs of 
operating and administering the Board, and that the MSRB shall have 
rules specifying the amount of such fees. The current MSRB fees are:
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    \14\ 15 U.S.C. 78o-4(b)(2)(J).
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1. Initial Registration Fee (Rule A-12, on Registration)
    $1,000 one-time registration fee to be paid by each dealer to 
register with the MSRB before engaging in municipal securities 
activities and each municipal advisor to register with the MSRB before 
engaging in municipal advisory activities.
2. Annual Registration Fee (Rule A-12)
    $1,000 annual fee to be paid by each dealer and municipal advisor 
registered with the MSRB.

[[Page 36474]]

3. Underwriting Fee (Rule A-13)
    $.0275 per $1,000 of the par value paid by a dealer, on all 
municipal securities purchased from an issuer by or through such 
dealer, whether acting as principal or agent as part of a primary 
offering--except that this fee does not apply to commercial paper or 
municipal fund securities, such as interests in plans.
4. Transaction Fee (Rule A-13)
    .001% ($.01 per $1,000) of the total par value to be paid by a 
dealer, except in limited circumstances, for inter-dealer sales and 
customer sales reported to the MSRB pursuant to Rule G-14(b), on 
transaction reporting requirements--this fee does not apply to the sale 
of interests in plans.
5. Technology Fee (Rule A-13)
    $1.00 paid by a dealer per transaction for each inter-dealer sale 
and for each sale to customers reported to the MSRB pursuant to Rule G-
14(b)--this fee does not apply to the sale of interests in plans.
6. Municipal Advisor Professional Fee (Rule A-11, on Assessments for 
Municipal Advisor Professionals)
    $300 per Form MA-I on file with the SEC by the municipal advisor--
this fee does not apply to dealers/underwriters to plans.
7. Examination Fee (Rule A-16, on Examination Fees)
    $150 test development fee assessed per candidate for each MSRB 
examination.
8. Late Fee (Rule A-11 and Rule A-12)
    $25 monthly late fee and a late fee on the overdue balance 
(computed according to the prime rate) until paid on balances not paid 
within 30 days of the invoice date by the dealer or municipal 
advisor.\15\
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    \15\ In addition, the MSRB charges data subscription and service 
fees for subscribers, including dealers and municipal advisors, 
seeking direct electronic delivery of municipal trade data and 
disclosure documents associated with municipal bond issues. However, 
this information is available without direct electronic delivery on 
the EMMA Web site without charge.
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    Begun in 2015, the Board's holistic review of fees that the Board 
assesses on regulated entities continues. The Board evaluates those 
fees with the goal of better aligning revenue sources with operating 
expenses and all capital needs. The Board strives to diversify funding 
sources among regulated entities and other entities that fund MSRB 
services in a manner that ensures long-term sustainability, while 
continuing to strike an equitable balance among regulated entities and 
a fair allocation of the expenses of the regulatory activities, systems 
development and operational activities undertaken by the MSRB. Proxies 
used by the Board for fairly allocating to regulated entities the cost 
of MSRB regulation include, but are not limited to: Being registered to 
engage in municipal securities or municipal advisory activities; the 
level of dealer market activity; and the number of associated persons 
engaged in municipal advisory activities on behalf of a municipal 
advisor. Recognizing that in any given year there could be more or less 
activity by a particular class of regulated entities, the Board, as it 
has historically, sought to establish a fee structure that would result 
in a balanced and reasonable contribution over time from all regulated 
entities to defray costs and expenses of operating and administering 
the MSRB.
    The Board's most recent evaluation focused on the fees assessed on 
dealers/underwriters to 529 college savings plans. Of the fees assessed 
to defray the costs of operating and administering the Board, dealers 
that sell interests in and dealers that act as underwriters to plans, 
that do not otherwise engage in the municipal securities business, are 
subject to three MSRB fees--the initial and annual registration fees, 
the examination fees, and the late fees (when applicable). During 
Fiscal Year 2016, the annual registration fees assessed on all 
regulated entities accounted for slightly less than 6% of the Board's 
total revenue, and of that amount, registration fees for dealers/
underwriters that engage in transactions relating to plans exclusively 
accounted for 0.9% of that slightly less than 6% of registration fee 
revenue, or less than 0.05% of total revenue.
    In 1999, the Board requested comment about a draft amendment to 
Rule A-13 to assess an underwriting fee on underwriters to plans.\16\ 
The draft underwriting fee applicable to underwriters of plans would 
have been assessed at the same level as the underwriting fee then 
assessed on underwriters of municipal bonds, but based on the purchase 
price the investor paid for the interests in the plan, exclusive of any 
commission. In addition, the draft underwriting fee would not have 
accounted for the redemption of interests in plans. The Board, however, 
did not proceed with that draft amendment to Rule A-13. The Board 
stated that:
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    \16\ See Request for Comments (March 17, 1999) (the ``March 
request''). In response to the March request, commenters submitted 
that the fee structure for dealers involved in the distribution of 
529 college savings plans was more like an administrative fee, and 
was significantly different from an underwriting discount or 
commission since such dealers did not undertake underwriting risks. 
Commenters also urged, if underwriting assessments were assessed, 
that assessments be lower than the assessments charged in more 
traditional municipal securities offerings and that the assessments 
consider any securities that are retired/redeemed. Commenters noted 
that the underlying mutual funds offered through a 529 college 
savings plan pay registration fees to the SEC.

    Based on the . . . continuous nature of offerings in municipal 
fund securities, the programmatic nature of most customer 
investments and the heightened potential that underwriting 
assessments could create significant financial burdens on issuers to 
their customers' detriment justify caution in imposing the 
underwriting assessment.\17\
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    \17\ See File No. SR-MSRB-00-6 (Apr. 5, 2000).

The Board has exercised that caution, and now has determined to assess 
an underwriting fee on dealers that are underwriters to plans at a 
level far below the underwriting fee assessed on underwriters of 
municipal bonds. As noted under ``Proposed Rule Change,'' underwriters, 
consistent with the Board's long-standing prohibition, will be 
prohibited under Rule A-13 from charging or otherwise passing through 
the underwriting fee to issuers of plans.
Proposed Rule Change
    The proposed rule change will assess an underwriter to a primary 
offering of a plan an underwriting fee of .0005% of the total aggregate 
assets of the plan for the reporting period ending December 31 each 
year, as required to be reported on Form G-45. For the purposes of the 
proposed rule change, if there are multiple underwriters of the primary 
offering of the interests in plans identified on Form G-45, the term 
``underwriter'' will be limited to the underwriter identified as the 
primary distributor in the official statement, i.e., the program 
disclosure booklet, for the primary offering submitted under Rule G-32. 
The Board will invoice that primary distributor for the assessment due 
under the proposed rule change beginning in May 2018.
    Specifically, the proposed rule change will amend Rule A-13(a) to 
reflect the amount of the proposed rule change's underwriting fee set 
forth in new subsection (c)(ii). The proposed rule change also will 
amend Rule A-13 to add new section (b) ``underwriting assessments--
certain municipal fund securities'' to Rule A-13. New section (b) will 
require that an underwriter to a plan pay an underwriting fee to the 
Board. As noted above, for the purposes of that new section, if there 
are multiple

[[Page 36475]]

underwriters for the plan identified on MSRB Form G-45, the term 
``underwriter'' will be limited to the underwriter identified as the 
primary distributor in the official statement for the primary offering 
submitted under Rule G-32 as of December 31 of the relevant year. The 
proposed rule change will renumber current section (b) of Rule A-13 as 
section (c). In new subsection (c)(i), the Board will set forth the 
underwriting assessment for primary offerings subject to assessment in 
section (a). In new subsection (c)(ii), the proposed rule change will 
set forth the amount of the assessment of the underwriting fee on 
underwriters to plans (.0005% of the total aggregate assets for the 
reporting period ending December 31 each year, as required to be 
reported on MSRB Form G-45). The proposed rule change will renumber 
current section (c) of Rule A-13 as section (d) of Rule A-13. Further, 
the proposed rule change will renumber current section (d) of Rule A-13 
as section (e). New section (e) of Rule A-13 will address the billing 
procedure as to how the Board will invoice dealers for payment of 
underwriting assessments and transaction and technology assessments, 
including dealers that act as underwriters to plans. For the 
assessments set forth in new sections (c)(i) and (d), the Board monthly 
will invoice brokers, dealers and municipal securities dealers for 
payment of underwriting assessments and transaction and technology 
assessments. For the assessments set forth in new subsection (c)(ii), 
the Board annually will invoice the underwriter identified in section 
(b) for the payment of underwriting assessments.
    As previously stated, new section (e) will provide that if there 
are multiple underwriters identified on Form G-45 for the reporting 
period ending December 31 each year, the Board will invoice the 
underwriter identified as the primary distributor in the official 
statement for the primary offering submitted under Rule G-32 of the 
relevant year. The proposed rule change will renumber current section 
(e) of Rule A-13 as section (f). The proposed rule change will clarify 
that the Board's long-standing prohibition on charging or otherwise 
passing through the fees required under Rule A-13 to issuers applies to 
all fees assessed under Rule A-13, including underwriting fees assessed 
on underwriters to plans.\18\ Finally, the proposed rule change will 
renumber current section (f) of Rule A-13 as section (g).
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    \18\ For over twenty years, the Board has stated that:
    the fees paid to the Board under rule A-13 should be 
characterized by dealers to issuers no differently than the annual 
fees paid to the Board . . . [under Rule A-12] and any other 
``overhead'' expenses that are incurred by virtue of the dealer 
engaging in municipal securities business.
    Exchange Act Rel. No. 34601 (Aug. 25, 1994), 59 FR 169 (Sept. 1, 
1994) (File No. SR-MSRB-94-12).
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2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(J) of the Act \19\ which requires, in part, that the 
MSRB's rules shall provide that each municipal securities broker, 
municipal securities dealer, and municipal advisor shall pay to the 
Board such reasonable fees and charges as may be necessary or 
appropriate to defray the costs and expenses of operating and 
administering the Board and that such rules shall specify the amount of 
such fees and charges.
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    \19\ 15 U.S.C. 78o-4(b)(2)(J). Section 15B(b)(2)(J) provides 
that each dealer shall:
    pay to the Board such reasonable fees and charges as may be 
necessary or appropriate to defray the costs and expenses of 
operating and administering the Board. Such rules shall specify the 
amount of such fees and charges, which may include charges for 
failure to submit to the Board, or to any information system 
operated by the Board, within the prescribed timeframes, any items 
of information or documents required to be submitted under any rule 
issued by the Board.
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    The MSRB believes that its rules provide for reasonable dues, fees, 
and other charges among regulated entities. The MSRB believes that the 
proposed rule change is necessary and appropriate to fund the operation 
and administration of the Board and satisfies the requirements of 
Section 15B(b)(2)(J),\20\ achieving a more equitable balance among 
regulated entities and a fairer allocation of the expenses of the 
regulatory activities, system development, and operational activities 
undertaken by the MSRB.
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    \20\ Id.
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    The proposed rule change will account for the differences between 
municipal fund securities and other municipal securities. The Board 
accounts for those differences both in the manner and in the amount of 
the underwriting fee that the Board will assess on underwriters to 
plans.
    To recognize the continuous nature of offerings in plans, the MSRB 
will assess the proposed fee in a manner that will be similar to how 
the SEC assesses registration fees on mutual funds pursuant to Rule 
24f-2 under the Investment Company Act of 1940, as amended. The MSRB 
will assess the proposed rule change on the plan's total aggregate 
assets as of December 31 each year, as reported by an underwriter on 
Form G-45. Thus, the proposed rule change will account for the 
redemption of units in plans. Further, to recognize the differences in 
the commission structure between other municipal securities offerings, 
such as municipal bonds, and offerings in plans, the Board will assess 
the proposed rule change at a rate that is significantly lower than the 
rate the Board uses to assess underwriters subject to assessment under 
Rule A-13(a) (the amount of the underwriting assessment under Rule A-
13(a) is .00275% of the par value of the primary offering).
    The proposed rule change will defray the costs of the Board's 
significant rulemaking, market transparency, educational and market 
outreach initiatives, market leadership, and inspections/enforcement 
support relating to underwriters to plans, an industry with 
approximately $266 billion in assets as of December 31, 2016, as 
reported in March 2017.\21\ The proposed rule change will diversify 
funding sources among regulated entities in a manner that will achieve 
a more equitable balance among regulated entities and a fairer 
allocation of the costs, systems, and services among other users and 
regulated entities. Looking forward to Fiscal Year 2020, the MSRB's pro 
forma budgets reflect a gradual decrease in reserve levels, even with 
the new underwriting fee on underwriters of 529 college savings plans, 
as expenses are projected to increase annually while current sources of 
revenue are projected to be flat.
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    \21\ See Strategic Insight 529 College Savings & ABLE 1Q 2017 
529 Data Highlights available at https://www.529insiders.com/uploadedFiles/529-Insider/News/2017/January/1Q%202017%20Strategic%20Insight%20529%20Data%20Quarterly%20Highlights.pdf.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Act requires that MSRB rules not be 
designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. In accordance 
with certain aspects of the Board's policy on the use of economic 
analysis,\22\ the Board has reviewed the proposed rule change. The 
Board believes the

[[Page 36476]]

proposed rule change is necessary and appropriate to ensure that MSRB 
registrants that participate in the underwriting activities of plans 
share in the costs and expenses of operating and administering the 
MSRB. The MSRB has considered the economic impact of the proposed rule 
change. The MSRB expects the impact of the proposed rule change to be 
small and unlikely to negatively impact the competitiveness of the 
underwriters or underwriting markets for 529 college savings plans.
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    \22\ The scope of the Board's policy on the use of economic 
analysis in rulemaking provides that:
    [t]his policy addresses rulemaking activities of the MSRB that 
culminate, or are expected to culminate, in a filing of a proposed 
rule change with the SEC under Section 19(b) of the Securities 
Exchange Act of 1934 . . . other than a proposed rule change that 
the MSRB reasonably believes would qualify for immediate 
effectiveness under Section 19(b)(3)(A) if filed as such or as 
otherwise provided under the exception process of this policy.
    Policy on the Use of Economic Analysis in MSRB Rulemaking, 
available at https://www.msrb.org/en/Rules-and-Interpretations/Economic-Analysis-Policy.
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    The proposed rule change will assess an annual fee of 0.0005%, or 
1/20th of a basis point, on plan assets to underwriters of plans.\23\
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    \23\ The SEC currently assesses a fee for mutual funds sold 
annually, which in 2017 amounts to 1.159 basis point per year. The 
fee rate which the SEC assessed for the mutual funds pursuant to 
Rule 24f-2 under the Investment Company Act of 1940, as amended, is 
by law, the same rate as the annual rate assessed for registered 
securities under Section 6(b) of the Securities Act of 1933, as 
amended. The SEC determines the fee rate at the beginning of each 
fiscal year.
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    In addition, the MSRB does not believe that the proposed rule 
change will result in any burden on competition that is not necessary 
or appropriate in furtherance of the purpose of the Act since it will 
apply equally to all underwriters engaged in a primary offering of 
interests in plans required to submit data to the MSRB on Form G-45. 
The assessment will be proportional to the overall size of each plan 
being underwritten; therefore, the MSRB believes the total fee charged 
to each underwriter will bear a reasonable relationship to the level of 
underwriting activities that are undertaken by the underwriter. 
Moreover, since the proposed rule change's amendment to Rule A-13 will 
result in an underwriting fee that is de minimus, underwriters of 529 
college savings plans that are not subject to Rule G-45 will not have 
an unfair competitive advantage.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Board did not solicit comment on the proposed change. 
Therefore, there are no comments on the proposed rule change received 
from members, participants or others.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \24\ and paragraph (f) of Rule 19b-4 
thereunder.\25\ At any time within 60 days of the filing of the 
proposed rule change, the Commission summarily may temporarily suspend 
such rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.
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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2017-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2017-05. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the MSRB. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MSRB-2017-05 and should be 
submitted on or before August 25, 2017.
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    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, pursuant to delegated authority.\26\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-16399 Filed 8-3-17; 8:45 am]
 BILLING CODE 8011-01-P